2014.03.04 regus plc annual results announcement year ended 31 december 2013 presentation

  Regus plc

2013 full year results

presentation Mark Dixon, Chief Executive Officer Dominique Yates, Chief Financial Officer

  4 March 2014

Caution statement

  No representations or warranties, express or implied are given in, or in respect of, this presentation or any further information supplied. In no circumstances, to the fullest extent permitted by law, will the Company, or any of its respective subsidiaries, shareholders, affiliates, representatives, partners, directors, officers, employees, advisers or agents (collectively “the Relevant Parties”) be responsible or liable for any direct, indirect or consequential loss or loss of profit arising from the use of this presentation, its contents

(including the management presentations and details on the market), its omissions, reliance on the information contained herein, or on opinions communicated in relation thereto or

otherwise arising in connection therewith. The presentation is supplied as a guide only, has

not been independently verified and does not purport to contain all the information that you may require. This presentation may contain forward-looking statements that are based on current expectations or beliefs, as well as assumptions about future events. Although we believe

our expectations, beliefs and assumptions are reasonable, reliance should not be placed on

any such statements because, by their very nature, they are subject to known and unknown

risks and uncertainties and can be affected by other factors that could cause actual results, and our plans and objectives, to differ materially from those expressed or implied in the

forward-looking statements. You are cautioned not to place undue reliance on any forward- looking statements, which speak only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statement contained within this presentation, regardless of whether those statements are affected as a result of new information, further events or otherwise. This presentation, including this disclaimer, shall be governed by and construed in accordance with English law and any claims or disputes, whether contractual or non-

contractual, arising out of, or in connection with, this presentation, including this disclaimer, shall be subject to the exclusive jurisdiction of the English Courts. Results overview

• – strong performance
• Strong mature performance; net margin up to 16.7%
• Firm control over cost – overheads (ex R&D) down 3.8% per available

  workstation

• Record network growth of 30% to 1,831 business centre locations
• Group revenue increased 23.3% to £1,533.5m
• 13% increase in full year dividend to 3.6p

  Grow, mature, return - the potential of our network 2014**

  Mature portfolio 2009 2010 2011 2012 2013

• Mature group expands as each year group graduates
• Manage all centres to achieve

  948 1029 1144 2131+ 1383 1831 mature margin potential

• Scale benefit on overheads drives improvements to operating margin
• Increasing EPS and mature free

  Mature EPS cash flow

  Y/E 31 Dec* 2011 2012 2013

• Re-investment drives additional growth and further benefits

Half year 3.8p 6.2p 7.6p Full year 8.6p 14.0p 17.0p

• These figures are prepared on a consistent basis ie. 2012 mature centres are those that were opened on or before 31 December 2010
• Illustrative based on guidance of at least 300 new centre openings in 2014
Strong mature performance

Mature operating profit* MATURE – improving performance

• Continued strong momentum

  205.3 170.5

• Operating profit up 33% to £205.3m

  170.5

• Mature EPS increased 34% to 17.0p (2012: 12.7p)

  £m

  106.8

• Gross profit up 9% as a result of better yield

  63.7

  management

• Strong operating margin of 16.7%, underpinned by overhead efficiencies and scale benefits
• – Mature free cash flow increased 5% to £156.5m 16.6p per share (2012: 15.9p)

Mature operating margin*

  16.7

  15.2

  10.3

  %

  6.5

  2010 2011 2012 2013

• These figures are prepared on a consistent basis ie. 2012 mature centres are those that were opened on or before 31 December 2010

Progress on overhead efficiency

Overheads* as a % of sales

• Group overheads (ex R&D) per available workstation reduced by 3.8%

  30

• Achieved through:

  19.1% 18.3%

  18.1% 18.0%

  Scale advantages of a larger network

• 20

  15.5%

  Further automation of back office

• %

  10

• Management delayering and strengthening

Overheads* per available workstation

  1,300

  1,200

  1,200

  1,130 1,105

  £

  1,063

  1,100

  1,012

  1,000 900

• Excluding R&D costs

Record network growth

Net annual growth of network

• 448 new centres
• – 30% growth of centre network (2012:

  35 17%)

• 30%

  30

• 76 new third place locations
• – total network now stands

  25 at 98

  20

  Opportune time to invest in broadening and deepening %

• 17%

  15

• 11%
• 10%

  our network

• – growing customer demand and attractive

  10 returns

  5

  New centres performing in line with expectations

• 1%
• MWB fully integrated and on track to add at least £15m to group EBIT in line with expectations

Investment in growth*

  301.1 175.3

  £m

  86.4

  71.4 5.

• These figures are prepared on a consistent basis ie. 2012 new centres are those that were opened between 1 January 2011 and 31 December 2012
• £7.2m invested in Research & Development – up 60%

  Innovation

• Ability to innovate crucial to driving long-term growth
• Examples of customer focussed innovation
• Business Workbox – self contained workspace
• DocStation
• – cloud printing platform
• Cloud Voice Platform
• Global Single Sign-on

• Driver-Less OfficeCar

  1. Workbox

  2. Driver-Less OfficeCar

  3. Business Station

  4. Business Hotspot

  5. DocStation 1.

  1

  2

  3

  4

  5

  Working with partners globally 3.

  1. Railway

• – Cambridge
• – Reading 2.
• – Amersfoort

  2. Community centre

  3. Roadside

  4. Airport

  5. Retail

  1.

  4.

  5.

• – Schiphol
• – Laren

Strong and growing customer demand

• Strong customer demand across all sectors
• Increasing customer diversity
• Support across 12 countries in last year
• Penetration of new markets
• – more companies looking to outsource
• – fixed and flexible
• Convenient and affordable
• Success with large global corporates
• Speed of set up key

Customer numbers

  2.0

  1.5

  1.0

• Supporting 1,000+ workers across 14 countries
• Mix of Office, Virtual Office and

  0.5 m

  Businessworld

  480,000 660,000

  802,000 983,000

  1,350,000 1,580,000

• Speed and convenience

Summary

• Strong mature performance
• Record growth of network
• New centres performing in line with expectations
• Continue to lead industry innovation
• Positive progress on overhead control

  Regus plc Financial review Income statement

• – mature centres

  £ million 2013 2012 Change

• 34% mature EPS growth to 17.0p (2012: 12.7p)

  Revenue growth of 3.7%

• Revenue 1,226.3 1,182.0 3.7%
• Gross profit

  REVPOW growth of 4.3% to £7,750, up £321

  359.0 328.3 9% (centre contribution)

• Occupancy strong at 83.8% (2012: 84.5%)

  Gross margin 29.3% 27.8%

• Gross profit increased 9% to £359.0m

  Overheads (153.8) (173.4) 11%

• Further maturation of 2011 additions

  Overheads as % of sales 12.5% 14.7%

• Strong cost discipline

  Operating profit* 205.3 154.5 33%

• Mature overheads decreased 11% and reduced

  Operating margin 16.7% 13.1% as a % of sales from 14.7% to 12.5% due to economies of scale and greater efficiency

  EBITDA 272.1 216.8 26%

  EBITDA margin 22.2% 18.3% Mature EPS (p)

  17.0 12.7 34%

• After contribution from joint ventures

  Regional performance

• – mature centres

  Revenue Contribution Mature margin (%) £ million 2013 2012 2013 2012 2013 2012

  Americas 534.0 509.6 168.9 153.4

  31.6

  30.1 EMEA 298.3 283.5

  82.5

  78.3

  27.7

  27.6 Asia Pacific 181.6 184.7

  58.7

  57.7

  32.3

  31.2 UK 210.7 202.9

  50.3

  37.6

  23.9

  18.5 Other

  1.7 1.3 (1.4) 1.3 - -

  Total 1,226.3 1,182.0 359.0 328.3

  29.3

  27.8

• Good performance
• – margin progression across all regions
• Asia result impacted by weakening yen

Cash flow

• – mature centres

  £ million 2013 2012 EBITDA 272.1 216.8

• Mature free cash flow per share of 16.6p

  Working capital (21.3)

  20.5 Maintenance capital expenditure (53.2) (58.0)

• Small outflow of working capital due to timing differences - represents 1.6% of gross Group working capital

  Other items

  3.1

  3.0 Net finance costs (5.2) (4.5) Taxation (39.0) (28.3)

• Maintenance capex remains in the 4-5% of mature revenues guidance range

  Mature free cash flow 156.5 149.5 Mature free cash flow per share (p)

  16.6 Net investment - new centres £ million 2013 2012

• Record investment in growth driven by strong demand across all markets
• – 448 new centres added

  EBITDA (83.7) (56.8)

• Strong positive working capital from new additions

  Working capital

  85.4

  25.9

• Investment supported by mature free cash flow and

  Growth (320.6) (161.3)

  external funding

  capital expenditure Finance costs (4.1) (0.6) Taxation

  21.9

  14.4 Net investment in

  (301.1) (178.4) New centre additions new centres

  448 243

  139 125

  45 Income statement

• – new centres

  £ million 2013 2012 New centres - 2012 New centres 2012

• Progressing in line to maturity

  Revenues 139.4

  39.0

• Occupancy up to 70%

  Gross profit 6.9 (8.7) Growth overheads (35.7) (53.9)

New centres 2013 Operating loss (28.8) (62.6)

• Record growth
• – 448 centres
• Successful integration of

  New centres 2013

  MWB - positive contribution Revenues 159.4 - to gross profit

  7.3 - Gross profit

• Growth overheads (92.5)
• Operating loss (85.2)

  Total new centre (114.0) (62.6) operating loss

  2013

• – similar progression to last year

Margin progression by year of opening

• Maturation progressing as expected

  NCO year group

  2011s narrowed margin gap 2013 2012 2011 2010

• NEW YEAR NEW YEAR NEW YEAR GROUP

  40

• 2012 and 2013 centres

  Financial

  34.3%

  Reporting tracking as anticipated

  33.4%

  30 30.7% Year 2012 2013

  20 2013

  %

  18.5%

  (ex MWB) n

  15.1%

  rgi a

  12.9%

  M

  10

• * A D

  IT B C

>2017.9%
• Gross profit (centre contribution) before Interest, tax, depreciation and amortisation
Grow, mature, return - the potential of our network 2014**

  Mature portfolio 2009 2010 2011 2012 2013

• Mature group expands through annual addition of centres

  948 1029 1144 2131+ 1383 1831

• Mature network increased by 21% on 1 January 2014
• Provides good forward visibility on the network and its revenue potential

  Scale benefit on overheads

• Mature EPS

  Y/E 31 Dec* 2011 2012 2013

  expected to continue to drive operating margin

Half year 3.8p 6.2p 7.6p Full year 8.6p 14.0p 17.0p

• These figures are prepared on a consistent basis ie. 2012 mature centres are those that were opened on or before 31 December 2010
• Illustrative based on guidance of at least 300 new centre openings in 2014
Group overheads (ex. R&D)

Total Group overheads*

• Investing to support growth whilst

  275.9 maintaining strong cost discipline

  221.6 Improving overhead efficiency with

• 225.7

  190.6 overheads (ex R&D) per available

  162.7

  £m

  workstation reducing by 3.8% - in spite of more growth, MWB transaction related costs and MWB overhead base

  2009 2010 2011 2012 2013

• Group overheads (ex R&D) as % of sales reduced to 18.0% (2012: 18.1%)
• Expect further progress in 2014

Overheads* per available workstation

• Significant increase in R&D investment - £7.2m, up 60%

  1,200 1,130

  1,105 1,063

  £

  1,012

• Excluding R&D costs

Funding increased investment

New centre additions Investment in growth*

• Record growth in network

  448 New centre returns support continued investment

• 301.1
• 175.3

  Mature cash flow capable 243

  £m

  of supporting approximately 139

  86.4 125

  71.4 15% centre growth per

  45 annum

  18.2

• Robust balance sheet to

  2009 2010 2011 2012 2013

  support growth

• Revolving Credit Facility

Mature free cash flow** Net cash/(debt)

  amended and extended by 156.5

  237.0 £120m to £320m

  144.3 191.5

  188.3 117.1

  120.0

  £m £m

  70.3

  55.1

  (57.2) _{** These figures are prepared on a consistent basis ie. * These figures are prepared on a consistent basis or before 31 December 2010 between 1 January 2011 and 31 December 2012 2012 mature centres are those that were opened on – i.e. 2012 new centres are those that were opened} 2009 2010 2011 2012 2013 Group results

• – overview

  £ million 2013 2012

• R&D spend increased 60% to £7.2m

  Dividend up 13% Gross profit

• Revenue 1,533.5 1,244.1

  373.8 320.7 (centre contribution)

  Gross margin 24.4% 25.8%

  Overheads (275.9) (225.7) Investment in R&D (7.2) (4.5) Joint ventures 0.1 (0.3) Operating profit

  90.8

  90.2 Operating margin 5.9% 7.3% Net finance (9.3) (5.1) Profit before tax

  81.5

  85.1 Taxation (14.6) (14.2) Profit for the period

  66.9

  70.9 EPS (p)

  7.1

  

7.5

Dividend per share (p)

  3.6

  

3.2

  Strong performance

• Good profit and cash performance from Mature business
• Record level of new centre growth, with 12s and 13s performing in line with expectations
• Strong discipline on cost control maintained with 3.8% reduction in SG&A costs (ex R&D) per workstation
• Robust balance sheet maintained - net debt of £57m

  Guidance

  Financial summary

• Maintenance capital expenditure
• – c. 4-5% mature revenues
• 2014 new centre additions
• – anticipate at least 300
• Strength of sterling will affect translation of results

  Regus plc Summary Summary 2014 priorities

• Focus on driving further improvements to mature operating profit
• Ensure new centres continue to progress

• Investing in innovation; further develop range of products and services

• Controlling absolute level of overheads and increase efficiencies

  Outlook

• Current trading is good and in line with expectations
• Growing network by at least 300 business centre locations, as well as add Third Place locations; driven by demand and returns criteria

  Regus plc Thank you Q&A

Appendices

  

1. Financial performance by maturity

  2. Consolidated cash flow

  

3. Overheads allocation methodology

  4. Investor relations contact details

  Financial performance by maturity 2013

  2012 Mature New Closed Mature New Closed Total Total centres centres centres centres centres centres £ millions

  Revenue 1,226.3 298.8 8.4 1,533.5 1,182.0

  39.0 23.1 1,244.1

Cost of sales (867.3) (284.6) (7.8) (1,159.7) (853.7) (47.7) (22.0) (923.4)

Gross profit (centre 359.0

  14.2 0.6 373.8 328.3 (8.7) 1.1 320.7 contribution)

Overheads (153.8) (128.2) (1.1) (283.1) (173.4) (53.9) (2.9) (230.2)

  0.1 0.1 (0.3) (0.3) – – – – Share of profit on joint venture Operating profit 205.3 (114.0) (0.5) 90.8 154.6 (62.6) (1.8)

  90.2 EBITDA 272.1 (83.7) (0.1) 188.3 216.8 (56.8) (0.7) 159.3 Consolidated cash flow £ millions

  2013 2012 Mature free cash flow 156.5 149.4

  

New investment in new centres (301.1) (178.4)

• Closed centres cash flow

  (6.4)

Total net cash flow from operations (144.6) (35.4)

Dividends

  (31.1) (28.2) Corporate financing activities 0.3 (2.3)

  Change in net cash (175.4) (65.9)

  Opening net cash 120.0 188.3 Exchange movements

  (1.8) (2.4) Closing net cash

  (57.2) 120.0 Overheads allocation methodology Four key elements 1. New centre opening costs estimated at £110,000 per centre.

  Reflects the costs incurred to the point of opening.

  2. Property team costs. It is estimated that 90% of the property teams ’ costs are spent on supporting the growth programme.

  

3. Sales and marketing costs. The principle is that the allocation

is made on the basis of new workstation sales as the nature of the spend is to generate new enquiries and convert into new sales. Renewals are excluded, as these are handled by the centre staff, who form part of our cost of sales.

  

4. All other overhead costs are allocated pro rata by reference to

available workstation numbers.

Investor relations contact details

  Wayne Gerry Group Investor Relations Director

• 44 (0) 7584 376533 wayne.gerry@regus.com